US Ban On Xinjiang Cotton Increases Domestic Inventory Pressure

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Since the U.S. ban on Xinjiang cotton was formally implemented in late June, textile and clothing orders exported to the United States have been greatly affected. Almost all of them need to trace the origin of raw cotton, and even require Southeast Asian countries (such as Vietnam) to provide cotton traceability certificates for fabrics.

According to the national cotton market monitoring data, the cotton inventory rate decreased by 4.9% compared with the national cotton market in the past year. Based on 5.262 million tons of Xinjiang cotton, there are still 1.67 million tons of old cotton for sale.

In terms of inventory, the domestic commercial inventory of cotton in July was 3.194 million tons, an increase of 691 thousand tons over the same period of last five years; Industrial inventory was 578100 tons, a year-on-year decrease of 336400 tons, a new low in recent five years. This shows that cotton upstream inventory backlog, and downstream procurement is not active, lack of confidence.

The U.S. Department of agriculture "intentionally" reduced the U.S. cotton production, helping ice cotton bottomed at 84 cents and rebounded more than 35%. Even if the Federal Reserve raised interest rates in September, USDA also raised the average cotton price to 95 cents in the August report. The fund increased net cotton spending multiple orders for three consecutive weeks, and the increase cost is expected to be 115 cents, It is almost impossible for us cotton to fall below 90 cents. Domestic cotton has a price advantage when the price difference between domestic and foreign cotton is as high as 3500 yuan / ton, and the probability of low innovation is also very small.

But the reality is "bone feeling", high inventory and weak downstream demand, so that the entire cotton industry chain, except for raw materials, is in a low inventory operation state. Now the harvest of new cotton is imminent, and the huge inventory of old cotton plus new cotton is slowly listed, which makes it difficult to turn over the price of cotton. In this context, the market can only through time and low prices to digest the pressure, and constantly stabilize the bottom, in order to usher in a rebound in the late market.